HealthNow pays $700,000 fine for benefit statement failures

New York insurance regulators have fined the parent of BlueCross BlueShield of Western New York $700,000 for failing to provide complete “explanation of benefits” statements in some cases that lay out consumer rights and benefits or tell members how to appeal claims denials.

The state Department of Financial Services imposed the penalty on Buffalo-based HealthNow New York for about 164,000 instances of failing to provide the complete benefits statements that are required under state law. Those instances involve claims that were denied in part or in full because the insured or subscriber had been “terminated” and for certain out-of-network claims. The benefits documents describe the services that are covered by the health plan and how consumers can appeal decisions.

“Consumers have a right to know what their health plans cover, what the plans don’t cover, and what they can do when their claims have been denied improperly,” said Superintendent of Financial Services Benjamin Lawsky. “This fine reflects the serious and systematic nature of the practices uncovered by the department. We are however, encouraged by Healthnow’s commitment to addressing the Department’s findings and improving its performance going forward.”

The insurer was also cited for recordkeeping failures and improper notifications to the state regarding its insurance agents and producers over a five-year period, in violation of state regulations.

Besides the fine, HealthNow agreed to take steps to prevent such violations from occurring again, including revising procedures about issuing explanation of benefits statements and making the required filings about its agents.

The agreement that HealthNow signed with the state specifically states that the violations were “not the result of any conscious company policy to evade the requirements of insurance law.”

“It basically has to do with record-keeping,” said HealthNow spokesman Julie Snyder. “Since that time, we have gotten all of our recordkeeping practices in better order... We’re hopeful that this fine will be placed in the proper context.”

Snyder said the state issues regulations and modifications almost every month, making it difficult to keep up with the changes despite having “people on the legal staff that all they do is assure compliance.” But officials now have a better understanding of “what the law specified, as it was written,” and the company has corrected the problems, she said.

The state’s action followed completion of a five-year audit that regulators perform every three years. That triennial audit, which covered the period from Jan. 1, 2004 through Dec. 31, 2008, included a “market conduct report” that cited the violations.

The report cited a failure by the company to meet certain provisions of state law governing recordkeeping for its brokers and agents. In particular, HealthNow failed to file certificates of appointment for insurance agents and notices of appointment of insurance producers within 15 days of the signing of an insurance agency contract or the submission of the first policy application. It also failed to ensure that commissions were paid only to licensed producers. And it failed to notify the state when insurance agents’ contracts were terminated.

Additionally, the company did not provide written acknowledgements of grievances within 15 business days, as required by law.